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SMEs hurt most by HSE guideline changes after fines rise by 89%

Construction health and safety fines have rocketed by 89 per cent after the introduction of the Health and Safety Executive’s prosecution guideline, data shared exclusively with Construction News has shown.

The total value of fines imposed in the construction sector increased to £5.3m in the six months following the introduction of the guideline on 1 February 2016, compared with £2.8m for the same period in 2015, research by global law firm Clyde & Co revealed.

The largest construction fine during this period was against Balfour Beatty, which was ordered to pay £2.6m after a worker died in a fatal trench collapse on an offshore wind farm in Lancashire.

Fines can exceed £20m for the very worst cases involving corporate manslaughter, and potentially even more for the largest companies.

The biggest fine issued overall by the HSE since the guideline was introduced was £5m for Merlin Attractions Operations, following the Smiler crash at Alton Towers.

Clyde & Co said it was “only a matter of time” before the industry faced similar penalties.

Its head of health and safety compliance Rhian Greaves said: “The floodgates are beginning to open and the new guideline is clearly having an impact. 

“We have seen more fines exceeding £1m this year than in the previous 15 years combined.

“Companies will be concerned that fines are now routinely hitting the £1m mark, even in apparently less serious cases, meaning all breaches of health and safety law are now a serious threat to a company’s bottom line.”

Health and safety graphic

Health and safety graphic

Medium-sized construction firms with a turnover of £10m-£50m have been the most affected by the changes, the analysis showed.

The value of a fine is determined by the company’s turnover or equivalent.

As a proportion of turnover, medium-sized companies have been hit with the highest fines of any business group.

The largest of these was against Monavon Construction, which was fined 28 per cent of its turnover. A total of £550,000 was levied against the firm for two offences of corporate manslaughter and one breach of the Health and Safety at Work Act 1974. 

However, fines against very large and large companies are yet to reach 0.1 per cent of their turnover.

Large companies are defined by the guideline as those with annual turnover in excess of £50m. In terms of very large companies, the guideline states that, “where turnover very greatly exceeds the threshold for large organisations, it may be necessary to move outside the suggested range [of fines] to achieve a proportionate sentence”.

Ms Greaves said: “The new guideline is clearly taking its toll on SMEs in the construction industry. It is perhaps inevitable that the impact on larger companies will have a similarly lasting economic effect in due course.”

In August, Balfour Beatty chief executive Leo Quinn warned that small companies could go bankrupt due to increased health and safety penalties.

He was speaking after the group revised its reserves for potential liabilities for H&S incidents, in the event of the company being fined in the future under the new sentencing guideline.

Biggest fines against SMEs since guideline’s introduction

Falcon Crane Hire was fined £750,000 in March 2016 – 3.8 per cent of its £20m turnover.

Premier Roofing was fined £140,250 – 2.2 per cent of its £6.5m turnover.

Walltopia was fined £500k in August 2016 – 3.6 per cent of its £14m turnover.

Montway was fined £144,000 in September 2016 – 2.2 per cent of its £6.5m turnover.

Richardson Roofing was fined £200,000 in October 2016 – 1.5 per cent of its £13.2m turnover.

SMEs hurt most by HSE guideline changes after fines rise by 89%

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